Redefining Mining Purpose in Times of Plummeting Prices

During Mining Indaba 2013, Mark Cutifani, now CEO of UK-based mining giant AngloAmerican, declared, “We miss the local communities. In the information age when people can see how others are living, but have to sit next to a big hole in the ground and suffer the consequences of what you and I enjoy on a daily basis, you know you’ve got the model wrong.” As thousands of mining professionals gathered in Cape Town February 9-12 for Mining Indaba 2015, one of the big questions in the room was “Is the industry making progress to get it right?”

Lower Commodity Prices Are Accelerating the Rise of Shared Value in Mining

The need for innovation to lower costs and increase productivity dominated much of the main stage discussion at Indaba. As mining companies are shifting towards greater mechanization and automation of mineral extraction, they are also starting to pay special attention to improving stakeholder engagement methods in order to decrease the frequency and severity of conflicts, and to ensure compliance with social, environmental and human rights regulation. The changing environment is causing a significant change in companies’ approach to health and safety, sustainability and community relations. Cost-cutting measures are forcing companies to become more strategic in their sustainability operations and in strengthening the business case for social investments. A number of sessions and speakers focused on ways to create shared value in mining, while traditional corporate social responsibility was discussed less.

Yet the discussion on shared value is still significantly ahead of its concrete application within the industry. The Shared Value Initiative report, Extracting with Purpose, offers a series of examples of contemporary shared value initiatives but stresses the significant barriers to scale them up across the industry. The discussion during Indaba 2015 underscored a tendency for mining companies to focus on short-term reactive approaches to mitigating downside risks – in other words, to shed value – rather than embedding the idea of creating shared value across company operations. For instance, various miners operating in West Africa took action against the Ebola outbreak by helping to curtail the toll of the disease, providing direct logistical support to health providers and ensuring their workers remain unaffected. Yet more ambitious public-private partnerships around infrastructure development and energy, for example the World Bank’s recent The Power of the Mine report, seem less likely to materialize in the current financial environment.

Creating a More Inclusive Stakeholder Dialogue for Shared Value

The dearth of capital should not serve as a pretext to avoid engaging stakeholders in order to identify new opportunities to create shared value. In his introductory remarks to the sustainability day, Tony Hodge, president of the International Council on Mining and Metals (ICMM), stressed the emergence of “a new paradigm in company-community” relationships. Graça Machel, an internationally renowned Mozambican politician and women’s and children’s rights advocate, called for “a new pact between government, companies, workers and communities to develop resources, share benefits and invest together”. A broad consensus emerged in favor of improved communication and better mechanisms to ensure companies can listen to communities in a more inclusive and continuous manner. However, how such a dialogue is supposed to take place remained unclear in the discussions.

A more inclusive dialogue involving community representatives and civil society, for example those who organized the 6th Alternative Mining Indaba, would seem like the right place to start developing more concrete mechanisms for dialogue with communities affected by mining operations. The leaders of the Alternative Mining Indaba and ICMM convened a closed session with representatives from their constituencies to advance this process. Opening up next year’s Africa Mining Indaba to civil society by making it more accessible to its representatives would help broaden the debate and make it more meaningful for the long-term sustainability of mining in Africa.

Shared Value Innovations

Creating the mining of the future will require fresh ideas, but “innovation” in the sector is still lacking. In 2012, investment in innovation by the mining industry was a mere 0.2% of revenue -which pale in comparison to the efforts of 20% to 30% by other industries. Simple tools can help mining companies redefine their purpose and business models without large-scale capital investments.

Ulula is exploring ways of using mobile technology approaches to de-risk mining operations through a more inclusive, continuous and data-driven stakeholder engagement model. Other organizations such as Pyxera Global are creating new models to increase local economic development and jobs in mining areas. In Uganda, Rakai Resources is embedding shared value at the core of its model through a holistic program of community training, engagement and as shareholder of the resource. On the environmental side, a recent analysis on emerging green mining innovations underscores the opportunity for greater adoptions of recent advances in biological tailings remediation, water treatment, hydrometallurgy, and carbon sequestration.

Following Churchill’s wisdom, the mining industry should not “let a serious crisis go to waste” and seize the opportunity to redefine its social purpose. Getting it right will require miners to go well beyond cost-cutting measures to remain sustainable by delivering value to shareholders and stakeholders alike.

Founder & CEO
Antoine is globally recognized as a thought leader on energy and natural resource management and has appeared on CNN International, Fox, Le Monde, and BBC. Before starting Ulula, Antoine worked with the United Nations Development Program and was Deputy Director of Revenue Watch Institute, which he helped grow into a leading organization in oil, gas and mining governance.